To facilitate the transmission of securities from nominees to legal heirs and to prevent the nominee from facing tax liabilities, the Securities and Exchange Board of India (SEBI) has mandated the use of a standard reason code, “Transmission to Legal Heir.” This code will be applied by reporting entities during the process of transferring securities from the nominee to the legal heir.
In a circular issued to Registrars and Transfer Agents (RTAs), listed issuers, depositories, and depository participants, SEBI instructed these entities to implement the necessary system changes by January 1, 2026.
SEBI emphasized that nominees serve as trustees of the securities, responsible for transferring them to legal heirs as part of a succession plan. However, the current process may subject nominees to capital gains tax during the transfer, a situation deemed inappropriate by the regulatory body.
“While the nominee may claim a refund of such tax, this process causes inconvenience to the nominee,” SEBI stated in its announcement. Earlier this year, a working group was established to collaborate with the Central Board of Direct Taxes to resolve this issue.
Published on September 19, 2025.
